Most major central banks have turned hawkish and have started tightening the monetary policy. Bank of England started hiking rates first in December, bringing them to 0.75%, while the FED hiked rates by 25 bps to 0.50% in last month’s meeting. The Reserve Bank of Australia was behind in this regard, as we haven’t heard many hawkish comments from them.

Nonetheless, the Australian dollar has been on a bullish trend since the end of January, increasing around 6.5 cents. Today, the RBA made some hawkish comments. opening the door for rate hikes, which helped the AUD and the NZD benefited from that as well. We decided to open a buy signal in NZD/USD after a small retreat earlier and now it has resumed the bullish move again.

Monetary Policy Decision by the RBA – 5 April 2022

• RBA leaves cash rate unchanged at 0.10%, as expected
• Prior rates were 0.10%

• Economy remains resilient and spending is picking up
• Household and business balance sheets are in generally good shape
• Strength of economy is evident in the labour market
• Wages growth has picked up but still only around relatively low rates before the pandemic
• Inflation has increased but it remains lower than in many other countries
• Wants to see actual evidence that inflation is sustainably within the 2-3% target range before increasing cash rate
• Over the coming months, important additional evidence will be available to the RBA on both inflation and the evolution of labour costs
• Full statement

There is a jump in the Aussie as the RBA makes some subtle changes to the forward guidance. Of note, they have dropped the notice on being “patient” in monitoring how inflation developments will proceed in the months ahead. In March they said that:

“The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.”

There are just a couple of changes by the RBA to their statement today but it is making a big difference as they start to lean towards being more hawkish. I outlined the changes already but I will recap them again for easier reading. For one, they dropped the stance on being “patient” when viewing inflation developments before deciding on the policy.

In March they said that:

“The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.”

And here is the one in April:

“Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs. The Board will assess this and other incoming information as its sets policy to support full employment in Australia and inflation outcomes consistent with the target.”

It is a subtle change and they even mixed up the language on the cash rate guidance as well. In March they said that:

“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.”

And this is the latest change today:

“The Board has wanted to see actual evidence that inflation is sustainably within the 2 to 3 per cent target range before it increases interest rates.”

Note how they took away the mention of not wanting to increase the cash rate and instead worded it as to what they want to see before increasing the cash rate. It’s the small changes that are making the difference here.

AUD/USD Live Chart